Property possibilities for 2016 and beyond

From a proliferation of private cities to purpose-built rental accommodation, numerous influences and trends are set to affect the local property sector this year and well into the decade, according to research by Pam Golding Properties.

“The economic environment is likely to remain sluggish in 2016, with an economic growth rate of close to 1.5 percent, interest rates inching higher during the first half of the year and inflationary pressures increasing. All of this is going to weigh on consumer confidence, as household finances come under more pressure,” says Laurie Wener, managing director of Pam Golding Properties for the Western Cape.

“Households are likely to be characterised by low levels of confidence, job insecurity, and eroding disposable income as costs increase due to higher interest rates, food, electricity and petrol prices. Against this background, the key issue is likely to be affordability – although this will mean different things to different segments of the housing market.”

She says that even in the upper income brackets, there is a growing resistance to soaring utility costs. People are downsizing their properties, although not necessarily buying cheaper homes. Smaller, lock up and go properties allow households to lower their overheads – notably rates, maintenance, security and general utility costs – while remaining chic.

South Africa has a predominantly young population with two-thirds aged 34 and younger, suggesting continued growth in first-time buyers in the housing market. Given the relative affordability – and superior security – offered by sectional title properties, continued strong demand for sectional schemes is likely.

Another factor indicating that sectional title properties will tend to outperform freehold in price in 2016 – as demand consistently exceeds supply – is that more households are opting for homes conveniently close to work, school or transport nodes. In response to growing congestion in major metros, homeowners are likely to be willing to sacrifice space for the convenience of location.

There is an acknowledgement that not everyone wants to live in a flat in an urban area and may prefer life in the suburbs. But international trends suggest that millennials will still expect work- live-play options in these suburban areas. This requires a new hybrid form of suburb that offers the amenities of an urban node, but with elements of suburban life such as office parks, shops and easy access to public transport.

“Globally, and locally, people who can afford homes of over R10m are becoming younger. These people are often looking for environmentally-sustainable or smart homes. Property owners increasingly rely on technology as the antidote to overloaded lives,” says Wener.

“The newest devices and apps are simplifying tasks, making better use of resources and transforming the way we live. In time, this trend is likely to trickle down into the broader market. Increasingly expensive electricity and the impact of current water shortages are likely to reinforce this trend for green, smart homes.”

Cape Town’s status as World Design Capital in 2014 has also promoted appreciation of the transformative role of design as a tool of social, cultural and economic transformation. Design-led thinking (user-centric, collaborative and following a creative process) is encouraging urban innovation, making cities more attractive, connected and healthy places to live in.

A smaller home in a desirable area means owners are also carefully selecting and investing in the homeware they install and products they use. They look for quality and longevity from well-known brands, or culturally-rich, authentic craftsmanship and handcrafted heirlooms from leading South African designer makers. Owners may buy less, but buy better.

People are also supporting initiatives (often tech-enabled) that empower them to take more responsibility for conditions and positive change in their communities. Taking charge could be as simple as joining a WhatsApp group for neighbourhood security, to a suburban community working with a service provider to privately negotiate access to solar energy and a fibre optic network.

There is growing support for a holistic, collaborative approach that supports individual and urban initiatives. For example AnotherLightUp in Cape Town encourages crowdfunding of street lights in Khayelitsha, with a multi-storey mural, visible from De Waal Drive, lighting up at night when a donation is made for a new streetlight to be erected.

Fast internet access is no longer considered a luxury but a necessity. The addition of optic fibre networks – fibre is 250 times faster than basic broadband – will be seen as a utility similar to electricity and water. Benefits for property owners range from improved security as it enables monitoring of streets and homes, to easier remote working from home, and quickly downloading entertainment or streaming TV.

As housing affordability gradually deteriorates with household incomes under pressure, and with a young population, more people are likely to be looking for rental accommodation rather than hoping to buy a home. Already a global trend, local investors can be expected to begin focusing on developing properties purpose-built for rental rather than sale, says Wener.

The growing use of public transport, already a well-established trend in many major global cities, is also set to affect the local property sector. The Gautrain has confirmed that South Africans can be persuaded to alter their commuting habits. When combined with MyCiti/BRT and Uber, housing demand is increasingly likely to be focused around public transport infrastructure. Car ownership patterns may eventually begin to change, as seen in many global markets.

Gauteng is leading the trend in a proliferation of private cities, with five major private cities already under construction. With many local authorities unable to adequately deliver services, and again in an attempt to avoid growing congestion, homeowners are increasingly opting for mixed use private city developments that offer medical, education, retail and residential in a single, secure environment.

“While growth in the national economy loses momentum, some regional and suburban housing markets in the country should continue to enjoy vibrant growth rates in 2016,” says Wener. “When investing in property, it is more important than ever to gain a clear understanding of the various factors that drive individual housing markets.”

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